Masahiko Aoki has been engaged with Stanford University for over four decades. He has witnessed the roots of Silicon Valley grow and seen the many successes of students who formerly passed through his classroom. Selected academic papers written over his 40-year academic career have recently been published.

Aoki is the Henri and Tomoye Takahashi professor emeritus of Japanese Studies in the department of economics and a senior fellow at the Stanford Institute for Economic Policy Research (SIEPR) and the Freeman Spogli Institute for International Studies (FSI), in residence at Shorenstein APARC.

You have been at Stanford since 1967 in different capacities – what has changed since then? Can you share some memories with us? 

I first came to Stanford as an assistant professor in 1967. Campus and the surrounding environment were different then – there were series of apricot orchards along El Camino to the south and my office was located in a wooden building – the old president’s house where the engineering buildings stand today. Changes at the university and in Silicon Valley have been fascinating to witness. I was away from Stanford in the 1970s, but when I came back in the 1980s, I had over 200 students at a time in my classes. This was because of widespread interest in Japan’s economic performance, which was then challenging American industries. Now students are inclined to be more interested in the rise of China. I share the same interest.

What has been most interesting for me is collaboration with graduate students and faculty to develop institutional studies. In the 1990s, I worked with Paul Milgrom, Avner Greif and Marcel Fafchamps among others, to initiate the field of comparative institutional analysis in the economics department. Greif and Fafchamps now have appointments in FSI like myself. Our research worked to understand why and how institutions matter to economic performance. However, my interests have expanded since then. I aim to understand relations between economic and demographic variables as well as institutional complementarities between economic institutions, social norms and political governance. As for my former students, many of them can now be found in important academic, government and private sector roles across the world.

What particular “lens” do you use to conduct your research?

Some influential economists understand that the nature of polity determines economic performance. They say this correlation is obvious if we compare the exploitative political regime like North Korea with that of a democratic political regime like South Korea. But this “lens” is a bit too simplistic for me. Why do ‘bad’ political regimes persist in some countries?  The relationship between political governance and economic performance is more complex than “the former simply causes the latter.”

To understand the relationship between political governance and the economy, I use game-theoretic concepts. While I am not a game theorist, I still believe that human interaction – whether economic, political or social – is a kind of game. People form beliefs based on how others play societal games. One of the important insights derived from these ideas is that political governance and economic institutions actually co-evolve. Furthermore, we need to look at the historical context to understand the present.

How have you applied these theories to the cases of Japan and the United States?

One of my major research interests has been the comparison of corporate governance across countries. Financial economists view the corporation as the property of stockholders. But we can also view the corporation as a system of distributed cognition. That is, the corporation is a group of people who have different cognitive roles and capabilities. Individuals can be organized to achieve economic value using physical assets as tools for respective cognitions.

By looking at corporations in this reversed way, we can identify different types of organizational architecture and their comparative advantages. In short, my research has found that managers’ cognitive assets are prioritized in U.S. corporate model, while workers’ entrepreneurial cognitive assets are prioritized in Silicon Valley’s model. In contrast, Japan favors a model where manager and workers’ cognitive assets are more interdependent.

You emphasize the connection between economics and demographics. What can be done about Japan and greater Asia’s rising demography problems?

Human capital is very valuable, but cultivating human capital is quite costly. Due to this constraint, the total fertility rate of women has declined as the economy develops. Scholars call this phenomenon the demographic transition. In addition, as economies further develop, people live longer and the working age population in the total population declines. Japan, Singapore and Taiwan are experiencing this phenomenon. Korea will follow this trend soon and at an even faster rate than Japan. Even if China modifies the one-child policy, the demographic dilemma cannot be escaped. And even for California, which is typically considered to be the youngest state in the U.S., a study predicts it will become the oldest state around year 2030.

So, what can be done to cope with this phenomenon? One option to raise the retirement age. Over two decades ago, Japan started this policy and has seen noted, positive effects. Another option is to increase and secure participation of women in the workforce. Across Asia, total populations are still rising due to immigration. Japan should consider liberalizing immigration. It is interesting to note that in the past 1,500 years Japan’s cultural development benefitted greatly from migration and assimilation of people, such as monks, political refugees and artists from Korea and China. 

With the recent execution of Abenomics, what performance can we expect to see from Japan’s economy in year 2014?

Abenomics has only been assessed in terms of short-term effects on the economy. Instead, my view is that Japan is now in the process of longer-term institutional change. Lifetime employment was the core of Japan’s overall institutional arrangement until some twenty years ago. The main banking system and government-industry relationship complemented and mutually reinforced lifetime employment. Though, with the demographic transition, the Japanese government has found it increasingly difficult to sustain. However, Japan’s institutional arrangements are normally very resilient. I think institutional transformation fitting this new demographic phenomena will require the duration of one generation. Institutions cannot be changed overnight by a revolution or government decree.

Of course, Abe could accelerate institutional adaptation by expanding the roles and opportunities for women and young people and creating more open foreign policy. This policy agenda may be related to the so-called “third arrow” of Abenomics, a period of structural reform following monetary easing and fiscal stimulus. But what Abe can do and has the willingness to do has yet to be fully seen. Thus, if we believe that Japan started the process of institutional change in the early 1990s and requires one generation to attain visible outcomes, the next several years are crucial. Tokyo has been chosen as the host city for the 2020 summer Olympics. I hope this event will act as Japan’s opportunity to display its changes to the international audience. 

The Faculty Spotlight Q&A series highlights a different faculty member at Shorenstein APARC each month giving a personal look at his or her teaching approaches and outlook on related topics and upcoming activities.

In an interview with Ars Technica about the visit to the Bay area of North Korean defectors, KSP associate director David Straub criticized their launching of propaganda-carrying balloons into North Korea as irresponsible in light of North Korean threats to retaliate by again attacking South Korea militarily. Although not included in the published interview, Straub prefaced his comments by noting that he "strongly agree[d] on the need to provide the North Korean people with as much information as possible about the outside world and their situation in it," but questioned the effectiveness of the balloon campaign compared to other, less provocative means.

Siegfried Hecker and his research assistant, Peter E. Davis, write that South Korea's nuclear energy program has become model that countries aspiring to obtain nuclear energy should emulate.

CISAC Senior Fellow Siegfried Hecker and his research assistant, Peter E. Davis, write in this Bulletin of the Atomic Scientists article that South Korea's nuclear energy program has become model that countries aspiring to obtain nuclear energy should emulate.

Japan’s first decade of the twenty-first century was both disappointing and bewildering, producing wildly contrasting evaluations. Many have come to call this period the “second lost decade,” characterized by policy paralysis and overall lackluster economic growth.

For those studying Japan more closely, however, the same decades reveal nothing short of a broad transformation in numerous core tenets of Japan’s postwar political economy. How can we best capture this transformation?

Each chapter in this volume examines a different aspect of Japan’s political economy within a longer historical trajectory, from multiple angles, to depict a flexible but resilient system. We characterize Japan’s process of change as syncretism—practices foreign, domestic, old and new were selectively adopted, mixed and matched, along the way creating a new and unique hybrid system.

Syncretism: The Politics of Economic Restructuring and System Reform in Japan, edited by Kenji E. Kushida, Kay Shimizu, and Jean C. Oi, is available for purchase from Brookings Institution Press.

Here is Gerhard Casper, standing before 7,000 people gathered in Stanford’s Frost Amphitheater to hear him deliver his first speech as the university’s president.

It’s 1992, the second day of October. Stanford is embroiled in a federal lawsuit over indirect research costs. It is struggling with campus-wide budget cuts and saddled with $160 million in damages caused by the 1989 Loma Prieta earthquake. University officials are wrestling with controversies over affirmative action, sex discrimination, free speech and diversity.

“What was I to say at my inauguration,” Casper asks in “The Winds of Freedom: Challenges to the University,” a newly published book of selected speeches and extended commentary about those addresses.

“What was I not to say? What were my tasks?”

Casper spent months wrestling with those questions, writing and rewriting his inaugural address. Rather than focus on the university’s troubles with a promise to make them disappear, he instead emphasized Stanford’s role as an institution devoted to teaching, learning and research. He grounded his remarks in Stanford’s motto – translated from his native German as “the wind of freedom blows” – and charted the freedoms most important to a university.

There are eight, he tells his audience.

Among them: an unrestrained pursuit of knowledge, an ability to challenge long-held beliefs and new ideas, and the “freedom to speak plainly, without concealment and to the point.”

“The research enterprise can easily be smothered by internal and external politics, pressures, and red tape,” he tells the crowd. “The wind of freedom has been a necessary, if not sufficient, condition for making our great universities the envy of the world. Without that freedom, that greatness is imperiled.”

Humor and heft

Academic freedom was a recurring theme during his eight years at the helm of Stanford. It was a time in which he navigated the university through turmoil and debates not only faced by Stanford and other American universities, but by the entire country.

With “The Winds of Freedom,” Casper presents seven speeches from his presidency, along with a commencement address he delivered at Yale in 2003. They delve into free expression, campus diversity and affirmative action. They cover the university’s role as a place of research and its relationship to the politics of the day.

A book launch celebration and discussion will be held Feb. 25 at Encina Hall.

The big, weighty ideas often come wrapped in a sense of humor – sometimes self-deprecating – that was the hallmark of a popular and seemingly very accessible president who surely never spoke to the same audience twice.

Casper has done more than merely dust off and repackage his favorite or most important speeches into a book. These are addresses tied together by those notions of academic freedom. And in detailed commentary following the text of each speech, Casper explains what was on his mind when he was writing them.

“I put a lot of effort into my speeches,” Casper says during a conversation in his office at the Freeman Spogli Institute for International Studies, where he is a senior fellow and served as director from 2012 to 2013. “But if you take the speeches in isolation, you often end up with an abstract notion of what was happening at time. I wanted to use these speeches as an example of the complexity of issues and questions that I had to deal with as president.”

Diversity, identity and valid arguments

So here is Casper welcoming an incoming class in 1993, one year after delivering his inaugural address. It includes white and black and American Indian students. Some are the American children and grandchildren of Mexican and Asian immigrants. Only 5 percent are foreign students, but they hail from 37 countries.

The president is talking about diversity. He shares his own story about coming to America, telling the students about growing up in Germany in the wake of the Nazi regime and moving to California as a 26-year-old in 1964. He pokes fun at the accent he never lost, but reminds the students that “I have acquired an American `cultural identity.’”

He tells them they will all develop their own sense of cultural identity, adding that diversity makes the university a richer place.

“If we at the university were not committed to interactive pluralism, education would become impossible,” he tells the newcomers.

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“No university can thrive unless each member is accepted as an individual and can speak and will be listened to without regard to labels and stereotypes,” he says.

Read out of context today, passages of the speech tuck into the timeless tropes of America as both a mosaic  and a melting pot. It’s OK to assimilate, he tells us. We can still maintain our own identities.

But In Casper’s rearview mirror, the speech becomes a history lesson, a reminder of the American landscape 20 years ago.

“The early 1990s was probably the decade during which multiculturalism and identity politics were most prominent in the United States in general and on American campuses in particular,” he writes in his new book. “When I came to Stanford in 1992, I was ill equipped to deal with some of these issues.”

He goes on to trace the steps Stanford took to address diversity and he shares his thoughts – some scholarly, some personal – on the issues of social and cultural identity. He parses the differences between multiculturalism and diversity.

He discusses the adoption of a new policy on sexual harassment, moves made to increase the number of women on the faculty, and the tensions arising from the university’s struggle to support on-campus ethnic community centers. He revisits the political and ethnically charged student protests that unfolded in the early 1990s.

While he was dealing with the daily fallout of those matters in the president’s office, he was also searching for opportunities to convey his positions and address the issues in his public speeches.

Welcoming the Class of 1997 gave him one of those chances.

“In a university nobody has the right to deny another person’s right to speak his or her mind, to speak plainly, without concealment and to the point,” he tells the incoming students.  “In a university discussion your first question in response to an argument must never be `Does she belong to the right group?’ Instead, the only criterion is `Does she have a valid argument?’”

The lines echo those he used in his inaugural address, and they do so intentionally.

“If you have something you believe in strongly, you must repeat it and repeat it and repeat it,” he says now. “I do that. I plagiarize myself – not because I ran out of things to say, but because it was important to re-emphasize points over and over again.”

Defining academic freedom

So here is Casper in 1998, speaking at Peking University during the school’s centennial celebration. The Chinese government used the occasion to bolster PKU’s standing as a key institution that would lead the country into the 21^st Century, and Casper focused his remarks on the role of research-intensive universities and the integrity they must maintain.

“Academic freedom is the sine qua non of the university,” he tells the audience. “Academic freedom means, above all, freedom from politics.” It also means “freedom from pressures to conform within the university,” he says.

Reflecting on that speech in “The Winds of Freedom,” Casper shares an unsettling irony: as he delivered his remarks, he was unaware that a Stanford research associate from China was being held in a Beijing prison under dubious charges of betraying state secrets.

He learned about the matter several months after the event, and writes now about the university’s unsuccessful appeals for the researcher’s release to then-President Jiang Zemin and his subsequent decision not to pursue a plan for Stanford to open a program at PKU at that time.

“I did not think that it was appropriate for me to enter into an agreement with one of China’s most prominent institutions – continue, as it were, as if nothing had happened – while a Stanford researcher was being held in prison without any explanation,” he writes. “I certainly did not take the step to suspend our discussions lightly, since throughout my life, throughout the many years of the Cold War, I had always favored engagement rather than iron curtains.”

“Germans don’t give funny speeches”

Casper gave his first public address at Stanford when he was 53. But he had already spent a lifetime as a speechmaker.

“I had been viewed in high school to have the ability to talk well and address a large audience,” he says. “And clearly, I liked to do it.”

He was elected president of the student council. His principal and history teacher, Erna Stahl, would call him the school’s festredner, or keynote speaker. He was tapped as valedictorian of the Class of 1957.

He discusses his valedictory address – focused on the dearth of German role models – in the preface to “The Winds of Freedom.” He writes about his relationship with Stahl, how he was impressed by her stories of  confronting the Gestapo, and the impact that growing up in post-Nazi Germany had on him.

“We hadn’t done any intensive study of the Third Reich by eleventh grade,” Casper says. “That was due to the fact that the Erna Stahl believed very strongly that going into the politics of the moment – the aftermath of the Nazi period – would not be the best method to teach us the values she wanted us to have. It would have become too quickly biographical and personal and she was very insistent that there needed to be positive values instilled in us to balance against what the Nazis had perpetrated.”

The preface is as close as the book comes to reading like a memoir, and Casper condenses his childhood, education, academic career and personal acknowledgments into 15 pages.

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Photo Credit: L.A. Cicero

While there are only a few lines devoted to his 26 years at the University of Chicago as a law professor, dean and provost, it was in that city where Casper’s innate ability to connect with an audience meshed with his public persona.

“Germans don’t give funny speeches,” he says. “In Germany, jokes undercut your credibility. My speaking style – the self-deprecation, the humor – that was really honed in Chicago. My friends and colleagues had these characteristics, and those elements were brought into my life.”

He learned that a joke does more than solicit a laugh. It can disarm a critic, humanize a speaker and lighten up an otherwise serious speech.

“After all, you want the audience to keep paying attention if you really do have something important to tell them,” he says.

An era begins

So here again is Casper, new to Stanford on that second day of October in 1992 and about to take on the promises and problems of the university.

He opens with a light touch, addressing “fellow members of the first-year class and fellow transfer students.” He suggests with deadpan delivery that he was hired as Stanford’s president because he could properly pronounce the university’s motto as it appears in German on the president’s seal: Die Luft der Freiheit weht.

“Alas, I have bad news for the board of trustees,” he says, turning to look at the board members seated on the stage behind him. The phrase, he says, was originally written in Latin. Not German.

“If, under these circumstances, the trustees would feel it appropriate to renounce their contract with me, I would understand perfectly,” he says, cracking a wide smile for the first time.

“All I ask for is the opportunity to finish this speech.”

And with his first formal words as Stanford’s ninth president, Casper casts himself as a newcomer – an outsider here to lead, learn and speak his mind.